Toyota: The New Japanese Word for "Toast"?

The company that could do no wrong is suddenly in big trouble.

If you've paid attention to the news at all in recent days, you've probably seen some of the stories: Toyota(NYSE:TM), long seen as the world's automotive "quality" king, a safe and shining global brand whose reputation was on par with companies like 3M(NYSE:MMM), Procter & Gamble(NYSE:PG), and Berkshire Hathaway(NYSE:BRK-A)(NYSE:BRK-B), has been forced to recall millions of vehicles because of a potentially dangerous problem.

The problem, in a nutshell, is something called "unintended acceleration." There have been a number of accidents as a result of this, including one last August in which a runaway Lexus killed an off-duty California Highway Patrol officer and his family.

To add insult to injury, Toyota has been ordered to stop selling eight models in the U.S. and a number of other countries until changes can be made.

The company, which said for months that the problem was because of incorrectly-placed floor mats, is now saying that the culprit is a part used in the gas pedal assemblies on several cars, that it has a fix, and that dealers are on the case. Assuming that the company has correctly identified the problem -- not necessarily a safe assumption, for reasons I'll get to -- that's good news if you own one of these vehicles.

But it took the company an awfully long time to get to this conclusion, and the repercussions are likely to drag on for months, maybe years -- several class-action lawsuits have already been filed. And some of those plaintiffs allege that the problem isn't a gas pedal issue, but is rather linked to a bug in the software used in many Toyota models.

It's a bad, bad dent in the company's once-lustrous PR armor. But is this the end of Toyota?

How bad will the fallout be?Toyota still has an awful lot of goodwill in the U.S. -- because of its reputation for quality, and because it is widely seen as the "greenest" of major car companies, thanks to the distinctive Prius. But that goodwill is under unprecedented assault -- as my fellow Fool Tim Beyers pointed out the other day, a number of Toyota quality issues have come to light in recent months, and there's some suggestion that the company has been trying to cover up troubles in some models for a while.

The near-term signs aren't good: While key competitors Ford(NYSE:F), General Motors, Nissan, and Volkswagen reported impressive year-over-year sales gains for January, Toyota's fell 16%, to the lowest monthly levels since 1999. Archrival Honda(NYSE:HMC) experienced a small decline, mostly because of falling truck sales -- but still reported soaring profits, which surely did nothing to lighten the mood at Toyota HQ.

Meanwhile, Toyota's foot-dragging is coming under scrutiny from another corner: U.S. Secretary of Transportation Ray LaHood said yesterday that his department is "not finished with Toyota" and will be watching the recall and repair efforts very closely.

Worse, Congress is getting involved, with upcoming hearings intended to examine, among other things, whether Toyota has in fact correctly identified the source of the problem. While these hearings are unlikely to result in business-breaking penalties, they will serve to keep the issue in the news for weeks -- and maybe months.

The upshotMuch as many American-car partisans might like Toyota to die a painful death, that's awfully unlikely. But its recently-inherited title of "world's biggest automaker" is in real jeopardy, with GM already talking about reclaiming it in coming months.

Whether this crisis represents an opportunity to buy Toyota stock is another question, one that's not yet simple to answer. The stock, which traded in the low $90s as recently as a few weeks ago, is about $73 as I write this -- but I'm not sure we've seen the worst of this particular crisis yet. Toyota's financial health is better than that of most major automakers, but if sales declines continue, things could get really ugly.

Still, as I said, the company isn't going away. The odds of this being seen in retrospect as a painful bump on the road seem a lot higher than the odds of this being the beginning of a permanent decline, and in that sense, this crisis might have created a good time to buy.

What do you think? Is Toyota stock radioactive -- or an intriguing buy? Leave a comment below and let me know.